Ford Plans To Cut 5% Of Salaried Work Force

By JEREMY W. PETERS

Published: June 22, 2005

The Ford Motor Company said Tuesday that it would cut 5 percent, or about 1,700, of its white-collar jobs in North America. It also said it would no longer give bonuses to managers or make matching contributions to the 401(k) plans of salaried employees.

Ford also lowered its yearly earnings forecast to $1 to $1.25 a share, compared with a previous forecast of $1.25 to $1.50 a share, saying it expected sluggish vehicle sales to continue. It was the second time in two and a half months that Ford cut its earnings projections for the year.

The job cuts announced Tuesday bring the total number of white-collar jobs Ford has said it will eliminate this year to 2,700. The company did not disclose how it would make the cuts.

''The sales rate has been lower than we thought,'' Mr. Leclair said in a telephone interview on Tuesday evening. ''We think that is a continuation of a trend of changing consumer preferences away from traditional, truck-based S.U.V.'s toward more fuel-efficient models.''

Sales of large and midsize S.U.V.'s, which have been a major profit source for both Ford and General Motors, have fallen sharply. For the first five months of the year, sales of Ford's Explorer and Expedition were down by more than 20 percent compared with last year. Sales of the Excursion, its largest S.U.V., were down more than 30 percent.

While the challenges facing Ford are severe, it is still in a better position than General Motors, which has stopped giving earnings guidance for the year. This month, G.M. said it would eliminate more than 20 percent of its blue-collar work force over the next three years.

Though Ford is better off than G.M., the news Tuesday that it expects weaker earnings this year underscores the two largest automakers' struggles to remain profitable.

''The same thing has hit G.M., but a lot harder,'' said David Healy, an analyst with Burnham Securities. ''But they're essentially in the same situation as G.M. They're producing a lot less gas-thirsty S.U.V.'s than they used to.''

Mr. Healy said the elimination of 401(k) matching contributions and the planned job reductions were signals to Ford's largest union, the United Automobile Workers, that it should accept reductions in union employees' health care benefits, which cost the automaker billions each year. ''This is firing a shot over the bow of Solidarity House,'' he said, referring to the U.A.W. headquarters in downtown Detroit.

Mr. Leclair would not comment on whether the job cuts and benefits reductions were meant as signals to the union. ''We don't do our negotiations with the union in a public forum,'' he said.

Ford has not yet approached the U.A.W. for any concessions. But some analysts interpreted an announcement last month by Ford's chief executive, William Clay Ford Jr., that he would forgo all company compensation until automotive profits improve as another sign that more cuts were seen as necessary.

Tuesday's announcement is the third time this year Ford has warned that its profits may not be as healthy as initially projected. In March, the company told investors to expect earnings at the lower end of the forecast it issued at the beginning of the year. In April, it cut its earnings guidance in half, sending Ford stock to the lowest point in more than a year and a half.

Ford made its reduced earnings forecast after the markets closed Tuesday. Before news of the job cuts and lowered earnings estimate were released, shares of Ford finished up 6 cents on the New York Stock Exchange at $11.17. But in after-hours trading, the stock fell as much as 3.5 percent, to $10.76.